12/07/2001 12:00AM

We don't need no regulation


NEW YORK - There were plenty of scheduled debates on the agenda last week at the annual Symposium on Racing in Tucson, but the most intriguing one was an added starter: the suggestion by a Magna Entertainment executive that the National Thoroughbred Racing Association's entire $25 million marketing budget should instead be spent on lobbying efforts to deregulate the racing industry.

Deregulation has long been a rallying cry for Magna. A year ago, when Magna and its seven tracks were on the verge of bolting the NTRA, a key reason they stayed in the fold was a promise by the NTRA to pursue deregulation. So now instead of throwing stones directly at the NTRA, Magna is paying its dues and saying generally nice things about the national organization, with the minor exception of how it spends nearly half its annual budget.

The question of whether to pursue industry growth through marketing or deregulation is not a simple one because it is impossible to argue against the need for either approach. In an industry best known for its inability to agree on much of anything, everyone concurs that the sport suffers on both of these fronts.

A lack of national marketing strategy or spending during the 1980's and 1990's certainly hurt the game's exposure and credibility, often relegating racing to the agate section of newspapers and equivalent invisibility on television. The sport also was stymied by its outdated status as a highly regulated revenue-generating arm of state government, which left it without the funds or the business freedom to compete with other forms of gambling.

So it would seem increased marketing and deregulation are both worthy goals. The problem, as it was characterized by Magna CEO Jim McAlpine in Tucson, is that the industry may not have the funds to pursue both goals and that deregulation may offer more bang for the buck.

"The $25 million they spend is just a drop in the bucket if you look at TV advertising budgets," McAlpine said. "I'm saying the money could be better spent."

That sentiment reflects growing impatience on the industry's part to see a more immediate return on its investment in the NTRA. The marketing spending over the last three years has boosted attendance and ratings for the sport's biggest events and garnered more television time and media buzz, but industrywide handle is flat at best while attendance continues to decline. Account wagering, the cornerstone of the NTRA's original business plan and the impetus for much of the investment by consolidators such as Magna and Churchill Downs, remains mired in regulatory limbo while television and wagering partners are either folding or burning through funds that will not be forthcoming forever.

In this climate, it is not surprising that some would advocate a radical change of course: Forget about national marketing and instead use the money to buy legislative votes that would allow racetracks to operate like real companies instead of state agencies - choosing their own days and hours of operation, offering whatever signals and bets and takeout rates they choose, exploiting in-home technologies without bluenose interference, and paying taxes on their corporate profits instead of their gross handle.

The approach clearly has merit, but what Magna and other proponents of deregulation need to do next is present a very specific plan before the industry considers abandoning a marketing strategy that cannot be expected to remedy decades of neglect in a few years. How much deregulation would $25 million, or $12.5 million, or even $2.5 million in annual lobbying buy? Since most of the burden exists at the state rather than federal level, which states would be targeted for reform? How long would it take to recoup the lobbying investment in the form of increased business, and can that business be sustained in the absence of national marketing?

Deregulation may well be the most exciting and promising big idea out there. If racing is ever going to enjoy truly meaningful growth, it will come not from more umbrella giveaways but through fundamental changes in the products and services it offers, changes that are almost impossible to effect in the current regulatory climate. It may well be a good idea to spend some if not all of the NTRA's marketing budget on a one-time effort in this area, and the most helpful thing Magna could do is to prepare and present a detailed proposal that could be discussed and debated before next December in Tucson.